Banco Comercial Portugues S.a. · EURONEXT:BCP

Banco Comercial Portugues — 9M 2018 Earnings Presentation

61 slides from Banco Comercial Portugues's earnings presentation, Nov 8, 2018

1. Slide 1: Earnings Presentation 9M 2018

   Millennium EARNINGS PRESENTATION @ 9M 2018 Q oO si imnHORGALAAN

2. Slide 2: Disclaimer

   Disclaimer The information in this presentation has been prepared under the scope of the International Financial Reporting Standards (‘IFRS’) of BCP Group for the purposes of the preparation of the consolidated financial statements under Regulation (CE) 1606/2002, as amended. The figures presented d

3. Slide 3: Agenda

   Agenda  Highlights  Group • Profitability • Business activity • Capital  Portugal  International operations  Key figures 3

4. Slide 4: Highlights

   Highlights 1 • Improved profitability, with net earnings of €257.5 million in the first 9 months of 2018 2 • Improved credit quality, with NPEs decreasing by €1.8 billion from September 30, 2017 • 3 Increasing business volumes in the third quarter of 2018, with total loans up by approximately €700 m

5. Slide 5: Highlights

   Highlights 1 Improved profitability 2 Improved asset quality (Consolidated net earnings, million euros) (Non-performing exposures, billion euros) -€1.8 billion 8.1 6.3 NPE group +93.1% -€1.6 billion 257.5 7.2 133.3 5.5 NPE Portugal 2.9 2.2 Other NPE 4.3 3.3 NPL>90d 9M17 9M18 Sep 17 Sep 18 3 Increasi

6. Slide 6: Highlights

   Highlights Recent rating actions recognise Millennium bcp’s Good performance on stress tests when compared to 5 6 improvement over the last years the average for banks tested Standard & Poor’s Outcome of the stress tests 2018 Stand-Alone Credit Profile Adverse scenario Long-term rating upgraded on O

7. Slide 7: Agreement for the acquisition of eurobank in Poland materialises renewed growth ambition

   Agreement for the acquisition of eurobank in Poland materialises renewed 7 growth ambition Strengthened geographic Reinforced market share in • Agreement for the acquisition of a 99.79% presence outside large cities non-mortgage retail loans stake in eurobank for an estimated consideration of €428mn

8. Slide 8: Agenda

   Agenda  Highlights  Group • Profitability • Business activity • Capital  Portugal  International operations  Key figures 8

9. Slide 9: Improved profitability across geographies

   Improved profitability across geographies (Million euros) Consolidated net earnings* Net earnings from domestic activity +93.1% 257.5 114.9 133.3 0.8 9M17 9M18 9M17 9M18 Net earnings from international operations • Net earnings of €257.5 million in the first 9 months of 2018, a 93.1% increase from €

10. Slide 10: Profit of €257.5 million in the first 9 months of 2018

    Profit of €257.5 million in the first 9 months of 2018 Impact on (million euros) 9M17 9M18 YoY earnings Net interest income 1,023.2 1,052.8 +2.9% +29.6 Commissions 494.6 510.1 +3.1% +15.4 Core income 1,517.8 1,562.9 +3.0% +45.0 Other income* 76.5 71.7 -6.2% -4.8 Operating costs -694.6 -754.2 +8.6% -

11. Slide 11: Strong performance of net interest income

    Strong performance of net interest income (Million euros) Net interest income Consolidated Portugal NIM 1.8% 1.8% NIM 2.2% 2.2% +0.7% 591.8 595.8 +2.9% 1,023.2 1,052.8 9M17 9M18 International operations NIM 3.1% 3.1% +5.9% 431.4 457.0 9M17 9M18 9M17 9M18 11

12. Slide 12: Commissions boosted by increased business volumes

    Commissions boosted by increased business volumes (Million euros) Fees and commissions Consolidated Portugal +4.4% 9M17 9M18 YoY 337.7 352.5 Banking fees and commissions 408.5 418.3 +2.4% Cards and transfers 115.3 122.3 +6.1% Loans and guarantees 117.9 121.6 +3.2% 9M17 9M18 Bancassurance 71.4 71.7 +

13. Slide 13: Other income influenced by mandatory contributions and credit sales

    Other income* influenced by mandatory contributions and credit sales (Million euros) Other income* Consolidated Portugal -6.2% 76.5 -20.5% 71.7 49.1 Equity earnings + 39.0 dividends 58.5 72.5 Includes -€21.6 9M17 9M18 million on credit sales Mandatory Net trading 57.9 66.5 income 115.0 contributions

14. Slide 14: Recurring operating costs under control

    Recurring operating costs under control, in spite of the impact from the reversal of salary cuts (Million euros) Operating costs Consolidated Portugal Impact from reversal of salary cuts: +€7.5 million +3.3% Recurring +2.1% 447.5 456.9 Recurring 718.3 742.2 +10.6% +8.6% 423.8 468.9 754.2 694.6 42.9

15. Slide 15: Millennium bcp: one of the most efficient banks in the Eurozone

    Millennium bcp: one of the most efficient banks in the Eurozone Cost to core income* Cost to core income* Latest available information 80% -7pp 73% vs. peers in vs. Euro-zone -38pp Portugal banks 86% 48% 48% 48% Bank 1 56% 57% 2013 9M18 Bank 2 50% 80% Cost to income 67% -4pp 63% Bank 3 64% 100% -27p

16. Slide 16: Cost of risk keeps a favourable trend

    Cost of risk keeps a favourable trend (Million euros) Impairment and provision charges Consolidated Portugal Cost of risk 137bp 102bp Cost of risk 120bp 88bp -34.3% 558.4 -31.4% 367.1 628.5 Other 168.5 78.6 Loans 390.0 288.5 Other 169.9 431.4 9M17 9M18 Loan-loss reserves 2,932 2,684 94.2 Internation

17. Slide 17: Relevant NPE reduction and strengthened coverage

    Relevant NPE reduction and strengthened coverage (Million euros) Credit quality Consolidated Portugal NPE total coverage* 103% 107% -22.6% NPE coverage by NPE 7,168 42% 51% -1.6 billion LLRs 5,546 -21.9% NPE 8,079 -1.8 billion 6,307 Other 3,350 Sep 17 Sep 18 2,514 International operations NPL>90d 4,

18. Slide 18: Agenda

    Agenda  Highlights  Group • Profitability • Business activity • Capital  Portugal  International operations  Key figures 18

19. Slide 19: Strong business dynamics results in growing Customer funds

    Strong business dynamics results in growing Customer funds (Billion euros) Total Customers funds* Consolidated Total Customers funds* in Portugal +5.5% +5.8% 72.8 53.2 69.0 50.2 Other 15.0 15.7 17.9 18.7 Off-BS funds 16.7 Term deposits 19.3 1.3 Demand deposits 16.0 18.8 Other BS funds 1.6 Sep 17 Sep

20. Slide 20: Strong business dynamics, with increasing loan portfolio

    Strong business dynamics, with increasing loan portfolio (Billion euros) Loans to Customers (gross) Consolidated Portugal NPE: -21.9% (-€1.8 billion) NPE: -22.6% (-€1.6 billion) Performing: +5.1% (+€2.2 billion) Performing: +4.2% (+€1.3 billion) +0.8% +€0.3 billion from 50.8 51.2 -0.8% June 30 37.9

21. Slide 21: Comfortable liquidity position

    Comfortable liquidity position Net loans to deposits ratio ECB funding (Billion euros) Eligible 12.5 15.6 assets -4pp 3.4 3.1 93% 89% Set 17 Set 18 Liquidity ratios (CRD IV/CRR) 182% 128% 100% Set 17 Set 18 NSFR (Net stable LCR (Liquidity funding ratio) coverage ratio) 21

22. Slide 22: Agenda

    Agenda  Highlights  Group • Profitability • Business activity • Capital  Portugal  International operations  Key figures 22

23. Slide 23: Adequate capital position

    Adequate capital position Common Equity Tier 1 ratio Fully implemented  CET1 capital ratio of 11.8% (fully implemented) ECB requirement (SREP) for CET1 in 2018: 8.8%  Increase from a 11.7% as of September 30, 2017 due to earnings for the last 4 11.7% 11.8% quarters (+80bp), partially offset by the

24. Slide 24: Capital at adequate levels

    Capital at adequate levels Leverage ratio Leverage ratio Fully implemented Fully implemented, latest available data 7.3% 6.0% 7.3% 5.7% 6.2% 4.7% 3.7% Sep 17 Sep 18 FR DE ES IT RWA density Texas ratio* RWAs as % of assets, latest available data 57% 87.1% 43% 44% 71.4% 25% 25% FR DE ES IT Sep 17 Sep

25. Slide 25: Agenda

    Agenda  Highlights  Group • Profitability • Business activity • Capital  Portugal  International operations  Key figures 25

26. Slide 26: Increased net income

    Increased net income (Million euros) Net income Banking income +114.2 114.9 978.6 987.4 0.8 9M17 9M18 9M17 9M18 Operating costs Includes non-usual negative impact of €12.0 million and impact from reversal of salary cuts (+€7.5 million)  Net earnings of €114.9 million in the first 9 months of 2018,

27. Slide 27: Net interest income

    Net interest income Net interest income (Million euros) +0.7% +22.3 591.8 +6.3 +14.7 595.8 -18.3 -13.7 -7.3 NIM 1.8% 1.8% 9M17 CoCo Effect of cost Effect of Effect of Credit Credit rate 9M18 repayment of time wholesale cost securities volume effect and effect deposits portfolio effect other  Net in

28. Slide 28: Continued effort to reduce the cost of deposits

    Continued effort to reduce the cost of deposits Spread on the book of term deposits Spread on the performing loan book (vs 3m Euribor) (vs 3m Euribor) 9M17 9M18 2.7% 2.7% -0.6% -0.7% 9M17 9M18 NIM  Continued improvement in the spread of the portfolio of term deposits: from -0.7% in the first 9 mont

29. Slide 29: Commissions and other income

    Commissions and other income* (Million euros) Fees and commissions Other income* 9M17 9M18 YoY -20.5% 49.1 Banking fees and commissions 293.0 303.1 +3.5% 39.0 Cards and transfers 78.5 81.9 +4.4% Loans and guarantees 77.9 79.1 +1.5% Bancassurance 58.8 60.7 +3.2% 9M17 9M18 Customer account related 69.

30. Slide 30: Operating costs

    Operating costs (Million euros) Operating costs Employees Impact from reversal of salary cuts: +€7.5 million +2.1% Recurring 447.5 456.9 -151 +10.6% 7,281 7,130 468.9 423.8 27.1 24.5 Depreciation Other 160.6 Sep 17 Sep 18 administrative 164.1 costs Branches Includes non-usual negative Includes non-u

31. Slide 31: Very strong pace of NPE reduction since 2013

    Very strong pace of NPE reduction since 2013 (Million euros) Non-performing exposures (NPE) • NPE in Portugal down to €5.5 billion as of September 30, 2018, a €1.2 billion reduction from year-end 12,783 2017 10,921 9,777 8,538 6,754 • This decrease is attributable to a €734 million NPL> 5,546 90d re

32. Slide 32: Lower NPEs, with reinforced coverage

    Lower NPEs, with reinforced coverage (Million euros) Non-performing exposures (NPEs) NPE build-up -22.6% 7,168 Sep 18 Sep 18 5,546 vs.Sep 17 vs.Jun 18 Other NPE 2,913 Opening balance 7,168 5,913 2,222 +/- Net exits -717 -91 NPL>90d 4,255 3,324 - Write-offs -401 -131 - Sales -504 -145 Sep 17 Sep 18 E

33. Slide 33: NPE coverage

    NPE coverage NPE total coverage* NPL>90d total coverage* 109% 107% 111% 108% 100% 101% 35% Real estate 26% 37% Real estate 44% collateral collateral 19% 65% 22% Cash, other 71% Cash, other 17% 14% fin.collat., EL gap fin.collat., EL gap 2% 56% 2% 63% 55% LLRs 48% LLRs 34% 27% Individuals Companies T

34. Slide 34: Foreclosed assets and corporate restructuring funds

    Foreclosed assets and corporate restructuring funds Foreclosed assets Corporate restructuring funds (Million euros) (Million euros) Valuation exceeds book value by 26% Original credit exposure: €2,006 million Book value (30 September 2018): €1,023 million 1,836 Total reserves (credit+restr. funds):

35. Slide 35: Strong business dynamics leads to increased Customer funds and performing credit portfolio

    Strong business dynamics leads to increased Customer funds and performing credit portfolio (Billion euros) Total Customers funds* Loans to Customers (gross) +5.8% 53.2 50.2 NPE: -22.6% (-€1.6 billion) Performing: +4.2% (+€1.3 billion) +€0.3 billion from 14.5 June 30 Off-BS funds 13.5 -0.8% 37.9 37.6

36. Slide 36: Credit now growing in Portugal

    Credit now growing in Portugal Performing credit portfolio Breakdown of credit growth (Billion euros) Mortgage 27% +4.2% 32.1 30.8 +€1.3 billion Consumer Companies and other 65% 8% 16.1 Mortgage 15.8 • Performing credit portfolio in Portugal expands by €1.3 1.6 billion (+4.2%) from September 30, 201

37. Slide 37: Strong Customer acquisition

    Strong Customer acquisition Active Customers Digital Customers (Million) (Million) Digital awards in the 3rd quarter • 3 honours in the Global Finance Best Digital Bank Awards: Best Consumer Digital Bank in +97,000 since Portugal, Best Online Deposit, December 17 Credit and Investment Product +120,0

38. Slide 38: Agenda

    Agenda  Highlights  Group • Profitability • Business activity • Capital  Portugal  International operations  Key figures 38

39. Slide 39: Positive contribution from international operations

    Positive contribution from international operations (Million euros) Δ% Δ% 9M17 9M18 ROE local currency euros Poland 118.0 129.0 +9.3% +9.5% 9.5% Mozambique 60.2 72.3 +20.0% +19.4% 23.5% Angola* Before IAS 29 impact 16.2 15.5 IAS 29 impact** -- 1.6 Total Angola including IAS 29 impact 16.2 17.1 +5.6%

40. Slide 40: Growing net income

    Growing net income (Million euros) Net income Banking income ROE 9.5% 9.5% +5.2% +9.3% 450.8 474.2 118.0 129.0 9M17 9M18 9M17 9M18 Operating costs  Net earnings of €129.0 million (+9.3%), with ROE of 9.5%  Increasing banking income, driven by net interest income +5.6%  Customer funds up by 5.6%,

41. Slide 41: Increased net income and commissions

    Increased net income and commissions (Million euros) Net interest income* Operating costs (Includes contribution to the resolution fund) NIM 2.5% 2.6% +6.7% Cost to income 46.3% 46.6% 303.0 323.4 +5.6% 211.4 223.2 Other 106.9 +3.7% 110.9 Staff costs 104.5 +7.5% 112.3 9M17 9M18 9M17 9M18 Commissions

42. Slide 42: Credit quality

    Credit quality (Million euros) NPL>90d Loan-loss reserves Credit ratio Sep 17 Sep 18 Coverage ratio Sep 17 Sep 18 NPL>90d 2.8% 2.7% NPL>90d 110% 132% 320.4 328.0 431.9 351.6 Sep 17 Sep 18 Sep 17 Sep 18 Loan impairment (net of recoveries)  NPL>90d accounted for 2.7% of total credit as of Cost of ris

43. Slide 43: Growing volumes

    Growing volumes (Million euros) Customer funds Loans to Customers (gross) +5.6% +14.3% excluding FX 16,193 mortgage loans Off-BS funds 15,332 +7.5% +2.0% 2,025 1,986 12,326 100 11,470 Other BS 106 -5.6% funds +20.5% 3,093 5,401 Mortgage local currency 2,567 Term deposits 5,847 -7.6% Mortgage -7.2% 3

44. Slide 44: Growing net income

    Growing net income (Million euros) Net income Banking income 23.7% 23.5% +8.4% ROE 177.4 +20.0% 163.7 72.3 60.2 9M17 9M18 9M17 9M18 Operating costs  Net earnings of €72.3 million (+20.0%), with ROE of 23.5%  Increasing banking income (+8.4%), driven by higher net interest income and other income +

45. Slide 45: Growing income partially offset by the increase in operating costs

    Growing income partially offset by the increase in operating costs (Million euros) Net interest income Operating costs Cost to income 38.7% 37.3% NIM 10.1% 10.4% +4.4% +6.1% 63.3 66.1 127.9 135.8 Other 35.4 +5.7% 37.5 Staff costs 27.9 +2.6% 28.7 9M17 9M18 9M17 9M18 Commissions and other income Emplo

46. Slide 46: Credit quality performance influenced by challenging environment

    Credit quality performance influenced by challenging environment (Million euros) NPL>90d Loan-loss reserves Credit ratio Sep 17 Sep 18 Coverage ratio Sep 17 Sep 18 NPL>90d 14.0% 15.9% NPL>90d 66% 60% 102.1 154.1 137.6 83.1 Sep 17 Sep 18 Sep 17 Sep 18 Loan impairment (net of recoveries)  NPL>90d rat

47. Slide 47: Business volumes reflect a conservative approach under a challenging environment

    Business volumes reflect a conservative approach under a challenging environment (Million euros) Customer funds Loans to Customers (gross) +1.2% 1,476 1,494 -20.9% 1,097 Mortgage -10.5% 12 Term deposits 679 +12.8% 766 Consumer and 186 868 other -22.1% 10 145 Companies 899 Demand 797 -20.8% 713 depos

48. Slide 48: Agenda

    Agenda  Highlights  Group • Profitability • Business activity • Capital  Portugal  International operations  Key figures 48

49. Slide 49: Key figures

    Key figures Consolidated 9M17 9M18 2021 Total active Customers 4.5 million 4.8 million >6 million Franchise Digital Customers 47% 55% >60% growth Mobile Customers 24% 32% >45% Cost to Income 44% 46% ≈40% RoE 3.2% 6.0% ≈10% Value CET1 11.7% 11.8% ≈12% creation Loans to Deposits 93% 89% <100% Dividend

50. Slide 50: Awards in 2018

    Awards in 2018 Millennium bcp: Best Consumer Digital Bank in Portugal; Best Online Deposit, Credit and Investment Product Offerings in Western Europe; Best Information Security and Millennium bcp Fraud Management in Western Europe for both individuals and companies internet Consumer Choice 2018, ban

51. Slide 51: Appendix

    Appendix AGILE | MODERN | PERSONAL | SIMPLE | SUSTAINABLE 51

52. Slide 52: Sovereign debt portfolio

    Sovereign debt portfolio Sovereign debt portfolio Sovereign debt maturity (Million euros) >8y, ≤10y >10y Sep 17 Jun 18 Sep 18 YoY QoQ 2% 2% ≤1y Portugal 4,945 5,938 6,335 +28% +7% 17% T-bills and other 712 673 971 +36% +44% >5y, ≤8y >1y, ≤2y Bonds 4,232 5,265 5,364 +27% +2% 13% 35% Poland 3,734 3,93

53. Slide 53: Sovereign debt portfolio

    Sovereign debt portfolio (Million euros) Portugal Poland Mozambique Other Total Trading book* 37 271 0 26 334 ≤ 1 year 0 14 0 0 14 > 1 year and ≤ 2 years 33 17 0 26 76 > 2 years and ≤ 5 years 2 193 0 0 196 > 5 years and ≤ 8 years 2 42 0 0 44 > 8 years and ≤ 10 years 0 5 0 0 5 > 10 years 0 0 0 0 1 Ba

54. Slide 54: Diversified and collateralised portfolio

    Diversified and collateralised portfolio Loan portfolio Consolidated Companies Loans per collateral 46% Mortgage 61% 27% 12% 46% Real guarantees Other guarantees Unsecured LTV of the mortgage portfolio in Portugal 16% 11% 14% 28% 11% 11% 11% Consumer 0-40 40-50 50-60 60-75 75-80 80-90 >90 /other 8%

55. Slide 55: Consolidated earnings

    Consolidated earnings Impact on (million euros) 9M17 9M18 YoY earnings Net interest income 1,023.2 1,052.8 +2.9% +29.6 Net fees and commissions 494.6 510.1 +3.1% +15.4 Other income* 76.5 71.7 -6.2% -4.8 Banking income 1,594.3 1,634.6 +2.5% +40.3 Staff costs -380.1 -435.6 +14.6% -55.4 Other administr

56. Slide 56: Consolidated balance sheet

    Consolidated balance sheet (Million euros) 30 september 30 september 30 september 30 september 2018 2017 2018 2017 ASSETS LIABILITIES Cash and deposits at Central Banks 2,192.5 2,144.8 Financial liabilities at amortised cost Loans and advances to credit institutions repayable on demand 330.3 1,113.4

57. Slide 57: Consolidated income statement

    Consolidated income statement Per quarter (Million euros) 3Q 17 4Q 17 1Q 18 2Q 18 3Q 18 Net interest income 344.7 368.1 344.8 342.8 365.2 Dividends from equity instruments 0.1 0.1 0.1 0.6 0.0 Net fees and commission income 164.3 172.1 167.8 172.4 169.9 Other operating income -10.4 -5.2 -29.1 -61.0 -

58. Slide 58: Income statement (Portugal and International Operations)

    Income statement (Portugal and International Operations) For the 9-month periods ended September 30th, 2017 and 2018 (Million euros) Int e rna t io na l o pe ra t io ns G ro up P o rt uga l T o tal B a nk M ille nnium ( P o la nd) M ille nnium bim ( M o z.) O t he r int . o pe ra t io ns Sep 17 Sep

59. Slide 59: Glossary (1/2)

    Glossary (1/2) Assets placed with customers – amounts held by customers in the context of the placement of third-party products that contribute to the recognition of commissions. Balance sheet customer funds – deposits and other resources from customers and debt securities placed with customers. Com

60. Slide 60: Glossary (2/2)

    Glossary (2/2) Net trading income – results from financial operations at fair value through profit or loss, results from foreign exchange, results from hedge accounting operations, results from derecognition of financial assets and financial liabilities measured at amortised cost, results from derec

61. Slide 61: Investor Relations Division

    illenniu INVESTOR RELATIONS DIVISION Rui Coimbra, Head EQUITY DEBT AND RATINGS Luis Pedro Monteiro and Paula Dantas Henriques Luis Morais and Lina Fernandes +351 21 1131 084 +351 21 1131 337 investors@millenniumbcp.pt Banco Comercial Portugués, S.A., a public company (sociedade aberta) having its re

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